I'm sure there are quite a few forgotten 'low-value' pension pots but there is no excuse for retaining them just because an application is late with no published latitude for unusual personal circumstances.
I wonder what defence the trustees would use when the first challenge reached the Pensions Ombudsman. The trustees have to demonstrate that they are looking after the individual as well the scheme and a decision such as this is ripe for a challenge. It could also mean individuals claiming benefits from one government department whilst having money withheld by another.